Housing market seen fragile for next 2 years - Reuters poll

LONDON (Reuters) - Britain's housing market will remain fragile over the next couple of years, with prices likely to fall a little by the end of this year before picking up modestly in 2013, a quarterly Reuters poll of economists showed on Friday.

As has been the case over the last few UK housing market polls, views varied widely among the 20 analysts surveyed in the last week, largely before the government's budget on Wednesday.

British house prices will end 2012 having fallen around 2.0 percent, according to the median consensus of economists, slightly gloomier than the 1.7 percent decline predicted in the last poll from December. Forecasts ranged from a fall of 5.5 percent to a rise of 3.0 percent.

Nationwide's house price index, the preferred index of most of the poll's respondents, suggested house prices increased 0.6 percent in February. The building society attributed this to signs Britain's economy might not be as weak as feared.

But there was a sense of pessimism among most economists that this would mark any sort of trend for the year.

"There are indications that demand has picked up recently, although it remains to be seen whether this is due to the end-month expiry of the stamp duty holiday for first time buyers," said Peter Dixon, economist at Commerzbank.

The government decided not to extend its exemption for first-time buyers paying stamp duty, a land transaction tax, on any house valued up to 250,000 pounds ($395,000), in this week's 2012-2013 budget.

"With banks raising their standard variable rates recently and the extra squeeze from the budget, households are likely to be less adventurous when it comes to the property market, which is likely to hit house prices," said Azad Zangana, economist at Schroders Investment.

A TAD OVERVALUED

Twelve economists thought UK house prices would fall from here, while six said they would not.

The poll again suggested UK house prices are still a little overvalued in comparison to economic fundamentals, assigning them "6" on a 10-point scale where "1" is very undervalued, and "10" extremely overvalued.

Britain's economy seems to faring a little better than its euro zone peers by avoiding recession, according to business surveys over the last few months, but ultimately its fortunes are linked strongly to major euro economies like Germany and France.

Economists polled earlier this month think Britain's economy will expand 0.6 percent this year - a historically weak level and a prediction subject to all sorts of downside risks, like booming oil prices and a worsening of the euro zone's debt crisis.

Rising unemployment represents one of the biggest housing market depressants. The British jobless rate held at a 16-year high in the three months to January, at 8.4 percent.

"Unemployment is likely to rise further and wage growth looks set to remain muted so the overall environment will still be very tough for households," said Howard Archer, economist at IHS Global Insight.

He said the squeeze on consumers' purchasing power should ease as inflation recedes, which might help house prices stabilise late in the year and in early 2013.

The poll showed house prices could rise 1.9 percent next year - although that median view was again formed from a vast range of responses, from a 4.0 percent fall to a 5.0 percent rise in 2013.

Monthly mortgage approvals as measured by the Bank of England are expected to continue their modest rise to reach around 60,000 in six months, and around 62,000 in a year's time.

January approvals totalled 58,728, according to the Bank of England and the end of last month.